Sphere 3D: Fiscal 3Q17 Financial Results

(in $ million)	3Q16	3Q17	9 mo. 16	9 mo. 17
Revenues	18.5	21.7	57.7	62.9
*Growth*		17%		9%
Net income (loss)	(43.3)	(3.5)	(61.0)	(18.8)

Sphere 3D Corp. reported financial results for its third quarter ended September 30, 2017.

“This quarter we grew revenue by 17% year-over-year and 12% sequentially from the previous quarter; both signs of the strategic and financial progress we have made,” said Eric Kelly, chairman and CEO. “In addition, I am proud of the progress we have made toward the goal of achieving profitability, evident by the improvement in our adjusted EBITDA of 84% year-over-year and 77% sequentially from the previous quarter. These solid financial results are driven by our improved business operations and the growing market recognition of both our virtualization and storage products.”

Three Months Ended September 30, 2017 Financial Results:

Net revenue was $21.7 million, compared to $18.5 million for the third quarter of 2016, which represented a 17% year-over-year growth in revenue.
Product revenue was $19.6 million, compared to $16.5 million for the third quarter of 2016, representing a 19% year-over-year growth.
Disk systems revenue was $14.1 million, compared to $11.1 million for the third quarter of 2016. Disk systems is defined as RDX, SnapServer family, VDI, and Glassware derived products.
Tape archive product revenue was $5.5 million, compared to $5.4 million for the third quarter of 2016.
Service revenue was $2.1 million, compared to $2.0 million in the third quarter of 2016, representing a 5% year-over year growth.
Gross margin was 31.1%, compared to 28.0% for the third quarter of 2016. Non- GAAP gross margin for the third quarter of 2017 was 33.7%, compared to 31.1% for the third quarter of 2016.
Operating expenses were $11.2 million, compared to $47.8 million for the third quarter of 2016. Included in the operating expenses for the third quarter of 2016 were $34.4 million in impairment of goodwill and acquired intangible assets.
Share-based compensation expense was $2.0 million, compared to $2.7 million for the third quarter of 2016. Depreciation and amortization was $1.5 million in the third quarter of 2017 and 2016.
Net loss was $3.5 million, or a net loss of $0.59 per share, compared to a net loss of $43.3 million, or a net loss of $21.10 per share, in the third quarter of 2016.
Adjusted EBITDA was a net loss of $0.6 million, or a net loss of $0.11 per share, based on 5.9 million weighted average shares outstanding, compared to adjusted EBITDA net loss of $4.0 million, or net loss of $1.96 per share based on 2.1 million weighted average shares outstanding for the third quarter of 2016.

The preceding financial results for the third quarter of 2017 include contribution from company’s acquisition in January 2017.

Nine Months Ended September 30, 2017 Financial Results:

Net revenue was $62.9 million, compared to $57.7 million for the first nine months of 2016 which represented a 9% year-over-year growth in revenue.
Product revenue was $56.2 million, compared to $51.2 million for the first nine months of 2016, representing a 10% year-over-year growth.
Disk systems revenue was $40.6 million, compared to $35.1 million for the first nine months of 2016. Disk systems is defined as RDX, SnapServer family, VDI, and Glassware derived products.
Tape archive product revenue was $15.6 million, compared to $16.1 million for the first nine months of 2016.
Service revenue was $6.7 million compared to $6.5 million in the first nine months of 2016, representing a 3% year-over-year growth.
Gross margin was 30.2%, compared to 29.3% for the first nine months of 2016.
Non-GAAP gross margin was 32.9%, compared to 32.4% for the first nine months of 2016.
Operating expenses were $34.3 million, compared to $75.4 million for the first nine months of 2016. Included in the operating expenses for the first nine months of 2016 were $34.4 million in impairment of goodwill and acquired intangible assets.
Share-based compensation expense was $5.6 million, compared to $7.4 million for the first nine months of 2016. Depreciation and amortization was $4.6 million compared to $4.7 million in the first nine months of 2016.
Net loss was $18.8 million, or a net loss of $4.28 per share, compared to a net loss of $61.0 million, or a net loss of $31.22 per share, in the first nine months of 2016.
Adjusted EBITDA was a net loss of $4.2 million, or a net loss of $0.96 per share, based on 4.4 million weighted average shares outstanding, compared to adjusted EBITDA net loss of $11.7 million, or net loss of $5.97 per share based on 2.0 million weighted average shares outstanding for the first nine months of 2016.